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You can find the current article at its original source at http://www.theguardian.com/commentisfree/2014/feb/18/wealthy-chinese-buyers-are-making-sydneys-housing-problem-worse
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| Version 0 | Version 1 |
|---|---|
| Foreign demand is making Sydney’s housing problem worse | |
| (8 days later) | |
| Every | Every |
| weekend in Sydney, young Australian couples are turning up at auctions excited | weekend in Sydney, young Australian couples are turning up at auctions excited |
| at the prospect of finally owning their own home, only to find that other | at the prospect of finally owning their own home, only to find that other |
| bidders are wealthy foreign buyers with money to burn. | bidders are wealthy foreign buyers with money to burn. |
| Last | Last |
| year, median house prices in Sydney rose by a crazy 15%, in some suburbs | year, median house prices in Sydney rose by a crazy 15%, in some suburbs |
| by up to 27%. Cash pouring in from China is one of the principal | by up to 27%. Cash pouring in from China is one of the principal |
| drivers and this flood of unregulated investment, coupled with other factors driving up Sydney house prices, are slowly changing the city’s social fabric in a way that will be felt | drivers and this flood of unregulated investment, coupled with other factors driving up Sydney house prices, are slowly changing the city’s social fabric in a way that will be felt |
| for generations to come. Couples planning families can no longer afford to buy in the suburbs where they | for generations to come. Couples planning families can no longer afford to buy in the suburbs where they |
| grew up, where they have built friendship networks or where they work. Forced | grew up, where they have built friendship networks or where they work. Forced |
| further and further west and south, they | further and further west and south, they |
| are progressively cut off from their old neighbourhoods. | are progressively cut off from their old neighbourhoods. |
| Watching | Watching |
| weekly auctions, one real estate agent from northern Sydney told the Australian | weekly auctions, one real estate agent from northern Sydney told the Australian |
| Financial Review that some Australians were “sick of going to auctions and being outbid by | Financial Review that some Australians were “sick of going to auctions and being outbid by |
| Chinese buyers paying above the odds.” Anecdotally, the Herald | Chinese buyers paying above the odds.” Anecdotally, the Herald |
| recently reported an auction for a Chatswood apartment at | recently reported an auction for a Chatswood apartment at |
| which all 16 registered bidders were ethnic Chinese. At another auction in Eastwood, all 38 registered | |
| bidders were Asian, according to the estate agent John McGrath. The property sold | |
| for $1m above the reserve price. | for $1m above the reserve price. |
| Of | Of |
| course, the real estate agents aren’t complaining; in a booming market, they | course, the real estate agents aren’t complaining; in a booming market, they |
| share in the spoils. Savvy agents are now travelling to China to talk up Sydney properties and advertise homes in Mandarin. Prominent agent Ray White has set | share in the spoils. Savvy agents are now travelling to China to talk up Sydney properties and advertise homes in Mandarin. Prominent agent Ray White has set |
| up an office in Beijing, from where they boast they now “catch all the best fish”. | up an office in Beijing, from where they boast they now “catch all the best fish”. |
| Juwai.com, the leading broker connecting Chinese | Juwai.com, the leading broker connecting Chinese |
| buyers with overseas property, estimates that 63m Chinese are rich | buyers with overseas property, estimates that 63m Chinese are rich |
| enough to buy property abroad. It claims that over the last three years, the | enough to buy property abroad. It claims that over the last three years, the |
| number of Chinese buyers in Australia has grown nine-fold, faster than anywhere | number of Chinese buyers in Australia has grown nine-fold, faster than anywhere |
| else. For wealthy Chinese looking for a safe haven, both for their money and | else. For wealthy Chinese looking for a safe haven, both for their money and |
| for themselves, it is hard to go past Australia. | for themselves, it is hard to go past Australia. |
| The | The |
| impact of those buyers on Sydney property has only just begun. As the value of the dollar falls, foreign buyers will be paying less for | impact of those buyers on Sydney property has only just begun. As the value of the dollar falls, foreign buyers will be paying less for |
| Sydney real estate, and the Chinese government is relaxing restrictions on Chinese | Sydney real estate, and the Chinese government is relaxing restrictions on Chinese |
| citizens wanting to buy overseas assets. Real | citizens wanting to buy overseas assets. Real |
| estate agents report that Chinese buyers often buy several apartments in a new development as a family group. Joseph | estate agents report that Chinese buyers often buy several apartments in a new development as a family group. Joseph |
| Ngo, an agent for LJ Hooker in Glen Waverly, said that paying $100,000 to $200,000 over the market price “is | Ngo, an agent for LJ Hooker in Glen Waverly, said that paying $100,000 to $200,000 over the market price “is |
| not a problem for these buyers”. The same is happening in Melbourne, if not quite at Sydney’s intensity. | not a problem for these buyers”. The same is happening in Melbourne, if not quite at Sydney’s intensity. |
| Under | Under |
| Australia law, foreigners are not permitted to buy second-hand homes, unless an | Australia law, foreigners are not permitted to buy second-hand homes, unless an |
| exemption is granted. They may buy new dwellings but must obtain approval from | exemption is granted. They may buy new dwellings but must obtain approval from |
| the Foreign Investment Review Board (FIRB). | the Foreign Investment Review Board (FIRB). |
| But the FIRB simply rubber stamps applications. In 2011-12 it refused only 13 | But the FIRB simply rubber stamps applications. In 2011-12 it refused only 13 |
| applications (down from 43 a year earlier), less than 0.01% of the | applications (down from 43 a year earlier), less than 0.01% of the |
| total. In 2011-2012, the FIRB | total. In 2011-2012, the FIRB |
| approved $4.2bn of Chinese spending on Australian residential and commercial real estate. It has yet to publish figures for 2012-2013, but agents say inquiries from clients of Chinese origin have doubled over the last | |
| year. | year. |
| A | A |
| good deal of secrecy surrounds the trend, yet observers know | good deal of secrecy surrounds the trend, yet observers know |
| something worrying is happening. The Reserve Bank of Australia (RBA) is one, quietly investigating why Sydney house prices are rising much faster than | something worrying is happening. The Reserve Bank of Australia (RBA) is one, quietly investigating why Sydney house prices are rising much faster than |
| bank mortgage lending. After all, its | bank mortgage lending. After all, its |
| concern is understandable. Housing bubbles keep economic managers awake at | concern is understandable. Housing bubbles keep economic managers awake at |
| night; a bust brings everyone down. | night; a bust brings everyone down. |
| So why | So why |
| is the Australian government allowing this to occur? Even the | is the Australian government allowing this to occur? Even the |
| government of Hong Kong, concerned that mainland Chinese investors were pushing | government of Hong Kong, concerned that mainland Chinese investors were pushing |
| up housing prices, slapped a 15% tax | up housing prices, slapped a 15% tax |
| on outside buyers. It worked, immediately causing cashed-up Chinese investors | on outside buyers. It worked, immediately causing cashed-up Chinese investors |
| to look further afield, including Australia. | to look further afield, including Australia. |
| While | While |
| not the only factor driving up house prices – negative gearing has a lot | not the only factor driving up house prices – negative gearing has a lot |
| to answer for – the impact of Chinese investment has been substantial. Treasurer | to answer for – the impact of Chinese investment has been substantial. Treasurer |
| Joe Hockey could stop it tomorrow if he chose to. He could, for example, instruct the FIRB to | Joe Hockey could stop it tomorrow if he chose to. He could, for example, instruct the FIRB to |
| put away the rubber stamp and apply the public interest test. In | put away the rubber stamp and apply the public interest test. In |
| granting approvals, the FIRB is required to consider the impact of each | granting approvals, the FIRB is required to consider the impact of each |
| investment on the economy and the community. | investment on the economy and the community. |
| It’s one thing to allow unrestricted | It’s one thing to allow unrestricted |
| foreign investment in businesses, and a case can be made that selling | foreign investment in businesses, and a case can be made that selling |
| Australia’s mineral resources to China has little downside. But housing is not | Australia’s mineral resources to China has little downside. But housing is not |
| just another asset. It’s where people live, put down roots, raise families and join | just another asset. It’s where people live, put down roots, raise families and join |
| in their communities. Some | in their communities. Some |
| experts in China believe that the rush of Chinese investment into Sydney property over | experts in China believe that the rush of Chinese investment into Sydney property over |
| the last couple of years is “just the tip of the iceberg”. A prudent | the last couple of years is “just the tip of the iceberg”. A prudent |
| government would see where we are headed and take steps now. | government would see where we are headed and take steps now. |
| • Editor’s note, 25 February 2014: This article generated strong response when published on 18 February 2014, including concern about racist undertones in its original headline “Wealthy Chinese buyers are making Sydney’s housing problem worse”. | |
| The author and Guardian Australia disclaim any racist intent. Both are conscious of Australia’s racist past. Neither believes that legitimate issues for public debate - here, housing affordability - should be avoided simply because the discussion may be viewed through the prism of that past. | |
| However, Guardian Australia accepts that where a reasonable person could infer racism in an adverse reference to any national or ethnic group. Guardian Australia must be especially vigilant to ensure that the evidence underpinning such content is solid. We have concluded that in this instance we were not vigilant enough. With assistance from our engaged readership, we have found that evidence originally cited in this article was not solid enough to support the original headline, which is now amended. | |
| The author acknowledges that he erred in his reporting of Foreign Investment Review Board data. The secondary source on which he relied conflated figures for residential and commercial investment and overstated the increase in investment from China in 2011-12. This has been corrected. The author stands by his basic thesis, which refers to investment over the last two or so years, though he recognises there is as yet no public FIRB data to support it. | |
| Two pieces of anecdotal evidence from real estate agents also appeared to support the original headline, but on closer examination they are not strong enough to do so. The author was not at fault; in the editing process, Guardian Australia itself did not draw sufficiently precise distinctions between references to Asian buyers in the housing market and those who are ethnically Chinese. Nor did we distinguish properly between ethnically Chinese buyers from abroad and those ethnically Chinese buyers who are local and may, of course, be several-generations Australian. The amended article paraphrases more precisely what the estate agents were reported by other media to have observed. | |
| As various contributors to the comment thread for this article show, the causes of fluctuations in housing prices are several and varied. Foreign buyers, and among them Chinese investors, may be a greater or lesser cause from time to time. Guardian Australia has concluded that, on the evidence presented, it was wrong to imply through the original headline that wealthy Chinese buyers are disproportionately a factor compared to any other national or ethnic group. | |
| The author stands by his opinion, as he is entitled to. Guardian Australia believes it must correct the evidence base underpinning that opinion and label it less emphatically in order to give readers assistance in weighing it and to avoid any inference of racism. |